Which statement best defines market value for real estate?

• A. Market value is the price a property would fetch in an open market.
• B. Market value is the price to a specific investor based on cash flows.
• C. Market value is the cost to replace the property.
• D. Market value is the assessed value used for property taxes.

Answer: (A)

Market value is the price a property would fetch in an open, competitive market under current conditions, with a willing seller and buyer and no unusual pressures. This captures how the general market would value the property based on demand, supply, and the property’s characteristics, rather than the specific needs of any one buyer or investor. It differs from replacement cost, which is the expense to reconstruct the property today, and from assessed value used for taxes, which is set by authorities and can lag market conditions. It also contrasts with values based on an individual investor’s cash-flow criteria, which reflect that particular buyer’s perspective rather than the broader market. So the price a property would fetch in an open market best defines market value.